Booming D-Wave Quantum (QBTS) Enters Uncharted Nosebleed Territory

Business Insider

27-05-2025

Although quantum computing remains a futuristic frontier, investors recently got a glimpse of its potential when D-Wave Quantum (QBTS) surged 28% following the debut of its latest quantum system, Advantage2. Practically overnight, QBTS became one of the most actively traded stocks in the U.S.
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While still speculative, I view D-Wave as one of the most commercially compelling pure-play quantum bets available, offering a rare mix of cutting-edge niche tech and long-term high-alpha potential. That said, with its current valuation looking stretched, I'm taking a neutral stance in the near term.
What Sets D-Wave Apart
D-Wave sets itself apart from most quantum computing companies by focusing not on gate-based quantum systems like those pursued by IBM (IBM) and Google (GOOGL), but on a specialized approach known as quantum annealing. Unlike general-purpose quantum computing, quantum annealing is designed to quickly identify optimal solutions by evaluating various possibilities and selecting the one with the lowest energy state.
With the introduction of its Advantage2 system, D-Wave has meaningfully advanced its annealing capabilities, improving qubit connectivity, reducing noise, and boosting computational accuracy. The system now links each qubit to 20 others, up from 15 in the previous version, significantly enhancing performance for complex optimization tasks.
A peer-reviewed Science study demonstrated that D-Wave's system could solve certain problems in mere minutes, tasks that would take classical supercomputers millions of years. That's a real, measurable step toward quantum advantage.
D-Wave is Nesting With Tech Giants
While many organizations and companies are building quantum computing without a real-world application, D-Wave has a formidable list of paying customers. Companies like Volkswagen (VWAGY), Lockheed Martin (LMT), NASA, and BBVA Bank (BBVA) have tested D-Wave's quantum annealing solutions for complex optimization problems.
In Volkswagen's case, D-Wave's technology has been used to optimize traffic patterns in dense urban centers like Beijing, with the goal of dramatically decreasing congestion levels and shortening commute times. Similarly, Spanish bank BBVA used quantum annealing to assess risk in the financial sector and reallocate investments accordingly, potentially identifying risks and opportunities quicker than previously.
Financial Health Check Shows High-Risk, High-Reward
There's no denying the high risk associated with investing in frontier technologies like quantum computing. In Q1 FY2025, D-Wave reported impressive revenue growth—$15 million, marking a 509% year-over-year increase, largely driven by hardware sales. However, this growth came alongside a net loss of $5.4 million and a concerning $19.3 million in cash burn.
To shore up its finances, D-Wave recently raised around $146.2 million through a share issuance that diluted existing shareholder equity. While equity dilution is common for early-stage tech firms, current investors should be mindful that future capital raises could further erode their ownership stakes.
From a technical standpoint, the stock appears overextended. The 14-week Relative Strength Index (RSI) is above 70, indicating overbought conditions, and the stock is trading well above both its 50-week and 200-week moving averages. These signals point to a potential pullback. While the long-term outlook is promising and speculative upside remains strong, I'm staying on the sidelines for now and maintaining a neutral stance until the valuation cools off.
D-Wave Is in a Crowded Market
There is robust competition in the quantum computing sector, as everyone, including IBM, Google, and IonQ (IONQ), is investing heavily in gate-model quantum computers. These computer models do provide broader computing capabilities, but D-Wave's quantum annealing is best at optimization tasks. This specialization gives D-Wave a significant first-mover advantage and a unique market position worth capitalizing on over the long term.
However, how long D-Wave will retain that advantage remains to be seen. Gate model quantum computing technology is developing quickly. If these improvements mean that the gate can complete optimizations as effectively as D-Wave's annealing technology, D-Wave's competitive advantage will diminish. But D-Wave isn't waiting for technology to reach a point where such competition exists; it's also investigating gate model technologies, allowing the company to pool across both areas. In the near term, its moat will almost certainly be retained by being the first mover to the market for optimization.
Is QBTS a Good Stock to Buy?
On Wall Street, QBTS has a consensus Strong Buy rating based on six Buys, zero Holds, and zero Sells. However, aligned with my opinion, the consensus rating sees a 30% downside over the next 12 months based on QBTS' average price target of $13. As such, it's best to wait before buying the stock.
The Time to Wait, Not Chase
Quantum computing is poised to reshape the tech landscape in the long run, and D-Wave is emerging as a category leader in quantum optimization. That said, it's important to keep expectations realistic. Despite its future promise, quantum computing remains a highly speculative and unproven space, with profitability still uncertain and stock price swings likely to be sharp.
For investors, D-Wave should be approached like a venture-style bet—an appropriately small, high-risk position within a well-diversified portfolio. If it delivers, the upside could be substantial. If it doesn't, the impact on your broader holdings remains limited. Right now, however, the stock looks overheated. The smart move is to wait for the current excitement to cool, then reassess for a better entry point ahead of the next potential rally.